2010 shifted the always unpredictable alchemy of business and politics in the Bay State.
A year that began with a political earthquake when Republican Scott Brown won the Senate seat formerly occupied by Edward M. Kennedy ended amid hopeful signs that the halting economic recovery was here to stay. Massachusetts employers spent 2010 trying to put the economic crisis behind them while dealing with developing crises surrounding the cost of health care and electricity.
What were the top 10 stories that affected Massachusetts employers during 2010?
- Massachusetts economy recovers fitfully, but faster than the nation as a whole.
The unique mix of knowledge-based, high-value companies that drive the Massachusetts economy helped the commonwealth end 2010 with an unemployment rate of 8.1 percent, well under the national rate of 9.3 percent. The AIM Business Confidence Index rose throughout the spring, and then returned to positive territory late in the year after turning bearish in the third quarter.
- AIM challenges expensive National Grid/Cape Wind power agreement.
Associated Industries of Massachusetts (AIM) asked the Massachusetts Supreme Judicial Court in December to set aside the commonwealth’s approval of a power-purchase agreement between National Grid and Cape Wind that will increase electric bills for thousands of Massachusetts employers. AIM said the agreement sets a dangerous precedent for allowing utilities to negotiate expensive power agreements outside of the competitive bidding process and to allocate the costs of those contracts unfairly to commercial and industrial customers.
- Rising cost of health care reaches crisis stage in Massachusetts; Governor Patrick and Legislature respond.
The cost of providing health insurance to workers reached the tipping point for employers as rates rose up to 40 percent and virtually everyone agreed that the Massachusetts health care market is unsustainable without fundamental changes to the way companies and consumers purchase medical services. Governor Patrick rejected scores of proposed rate increases by insurance plans, then signed a cost-containment law requiring insurers to offer low-cost, limited or tiered network plans, and setting the stage for broad changes in the way insurance companies pay for medical care.
- Political scramble - Scott Brown elected to the Senate and Governor Patrick re-elected despite national Republican landslide.
Republican Scott Brown of Wrentham shook the political world in January when he won a special election to fill the Senate seat held for decades by the Kennedy family. The election made Brown a superstar in Washington and unleashed a tidal wave that returned Republican control to the House of Representatives in the November elections. Ironically, one of the only states the tidal wave missed was Massachusetts, where Governor Patrick won re-election and every Democratic representative was returned to office.
- Corporate acquisitions are back.
Two years after the global financial crisis, New England companies with strong balance sheets pulled out their wallets and began to make strategic acquisitions. Connecticut-based Northeast Utilities agreed in October to buy NStar for $4.17 billion in a deal that will create the largest New England utility company. German drug giant Merck KGaA bought life sciences company Millipore of Billerica for $6 billion in March. Massachusetts companies were also buyers: Thermo Fisher Scientific announced in December that it would purchase Dionex Corporation of California for $2.1 billion.
- Congress passes federal health care reform; judge later declares portions of the law unconstitutional.
President Barack Obama in March signed landmark national health reform legislation that bore a striking resemblance to the Massachusetts health care reform law of 2006. The federal law requires individuals to carry health insurance, changes underwriting rules and imposes a fee if an employer does not offer coverage. The fact that Massachusetts was the only state in the nation with its own health reform initiative was a mixed blessing for employers – the concepts were familiar, but there are significant differences between the state and federal laws that must be reconciled. In December, a U.S. District Court judge in Virginia ruled that the individual mandate is unconstitutional.
- Defense industry emerges as the untold success story of the Massachusetts economy.
A report by AIM and the University of Massachusetts in December showed that as the overall economy has struggled in the face of two recessions and fundamental industry shifts, Massachusetts defense contractors quietly tripled the value of their contracts to $15.6 billion. They doubled their employment rolls to 115,563 people and increased their overall economic output by 146.2 percent. The report also found that innovation-rich Massachusetts defense contractors are well positioned to offset overall defense cutbacks by addressing technology needs at the Departments of Defense and Homeland Security.
- Business blocks organized labor priorities; Obama appointments to labor board create challenge for employers.
Furious lobbying by AIM and business interests around the country prevented passage in Congress of the so-called Employee Free Choice Act, which would have deprived workers of the right to a private ballot in union elections. Congress also declined to pass another labor priority, the Paycheck Fairness Act. But President Obama’s appointment of union lawyers Craig Becker and Mark Pearce to the National Labor Relations Board shifted the labor relations playing field steeply away from employers.
- Massachusetts approves wide-ranging economic development measure.
The Legislature approved and the governor signed an economic development bill that limits the scope of combined tax reporting, creates a 3 percent capital gains tax rate for individual investors in start-up companies, and provides most industries with the ability to extend a net operating-loss (NOL) carryforward from five to 20 years. The bill also places an automatic sunset provision on state regulations and requires proposed new regulations to include a business impact statement. The state will undertake a study of the factors driving the high price of electricity for Massachusetts employers.
- State lifts charter school cap, adopts national standards and wins Race to the Top dollars for education reform.
A controversial decision to endorse national education standards paid off for Massachusetts in August when the commonwealth won some $250 million in federal education money through the Race to the Top (RTTT) competitive grant program for school improvement. The money will support reform efforts in four areas: standards and assessments; statewide data systems; effective educators; and turning around low-performing schools. These priorities were supported by employers, who recognize the importance of educated citizens to fuel economic growth.
What is your opinion about the most important business developments of 2010? We welcome your comments.